KUALA LUMPUR (Sept 15): RHB Investment Bank (RHB IB) has maintained its “overweight” rating of the basic materials sector, and said its outlook on demand for aluminium is still upbeat, expecting to see a meaningful recovery beyond 2024, thanks to still-low aluminium inventories, growing demand for solar panels, and the “green push” towards electric vehicles in Europe.

In a sector update on Friday, the research house said it had added Malayan Cement Bhd (LMC) as one of its top sector "buy" calls, as it is a direct beneficiary of the revival of construction and property activities in Peninsular Malaysia.

RHB IB said Press Metal Aluminium Holdings Bhd’s results for the second quarter ended June 30, 2023 were softer than the consensus and its forecasts, primarily due to lower LMC aluminium prices, despite the easing in raw material prices (for carbon anode and alumina).

“LMC’s earnings surprised the street yet again, at 111% and 122% of our and the consensus full-year estimates [respectively], thanks to an improvement in sales volumes, and higher average selling prices of both domestic cement and ready-mixed concrete. Cahya Mata Sarawak Bhd’s earnings disappointed again, due to its loss-making road maintenance and phosphate divisions,” it said.

The research house said that demand for cement in the mid to long term will be buoyed by roll-outs of major infrastructure projects, such as the Kuala Lumpur-Singapore High Speed Rail (HSR), Johor Bahru-Singapore Rapid Transit System (RTS), Bayan Lepas Light Rail Transit (BLLRT), and Mass Rapid Transit 3 (MRT3), signalling a potential pickup in construction activities in the peninsula.

“Key sector downside risks include a decline in LME aluminium prices, decelerating global economic growth, higher-than-expected raw material costs, lower-than-expected cement ASPs, and lower-than-expected cement production,” it said.